What
are the sources for mortgage financing? TOP
| There
are a wide range of financial institutions that
are involved in the mortgage industry in Canada.
Some of these include: |
|
•
Chartered Banks, Loan Corporations |
|
|
•
Trust Companies, Credit Unions |
|
|
•
Finance Companies, Pension Funds |
|
|
•
Life Insurance Companies, Private Individuals |
|
|
•
Your Mortgage Intelligence Mortgage Consultant
will select the mortgage lender who’s right
for you! |
Will
I need mortgage insurance? TOP
| A
mortgage is a large debt and should be life insured,
for your family's peace of mind. Some lenders
include life insurance as part of their cost;
others will let you insure the mortgage yourself.
But Mortgage Intelligence always recommends mortgage
insurance in some form. |
Are you
Mortgage Brokers? TOP
| In
the Province of B.C., Mortgage Consultant
is the correct term for a Mortgage Broker.
|
How
much will it cost me to have a Mortgage Intelligence
Mortgage Consultant? TOP
| For
most people the Mortgage Intelligence Mortgage
Consultant provides a free service. They receive
their fee from the lender providing your mortgage. |
Will
this fee increase the cost of the mortgage? TOP
| No
because the lender either has to pay its own sales
staff to originate mortgages or it can pay a broker,
it’s all the same. |
What
is the best term to consider? TOP
| Usually
the shorter the term the lower the rate. However
many people prefer the comfort of a longer-term
mortgage and as an example we have provided a
historical tracking of the five-year rates. This
is another area where your Mortgage Intelligence
Mortgage Consultant can help. |
How
does my amortization affect the amount of interest I
pay? TOP
| The
amortization period has a dramatic effect on the
amount of interest paid over the length of the
mortgage. Consider the example of a $150,000 mortgage
with an interest rate of 6.20%*
With
a 25 year amortization the monthly payments
are $977.61
With
a 20 year amortization the monthly payments
are only increased by $107.57 to $1085.18. The
savings in interest would be $32,843.40
With
a 15 year amortization the monthly payments
are increased by only $298.03 to $1,275.64.
The savings in interest would be $63,669.38
*
The example assumes the interest rate will remain
constant through the whole amortization period.
|
What
difference does payment schedule make? TOP
| Most
mortgages have very flexible payment alternatives.
Weekly, bi-weekly, or monthly payments are most
common. These choices also have a great effect
on the overall interest payments.
Consider
the example of a $150,000 mortgage with an interest
rate of 6.20% over a 5 year term.
|
|
Payment |
Remaining
balance at end of term |
| Weekly
|
$244.40 |
$129,285.80 |
| Bi-weekly
|
$488.81 |
$129,327.89 |
| Monthly
|
$977.61 |
$135,132.08 |
|
|
Is it true
that I can get a free 5% downpayment? TOP
To help first time buyers and those who do
not have sufficient down payment, CMHC and GE
have introduced a new program that allows for
Cash back scenarios that can be used as the
down payment.
|
How
does the 5% Down Payment Program Work? TOP
| Under
the 5% Down Payment Program, the minimum down
payment of 5% of the purchase price or appraised
value, whichever is less.
The
down payment must be from customer's own resources
or an outright financial gift from immediate
relatives. If the minimum equity requirement
is being met by way of a financial gift, the
funds must be in the possession of the borrower
at the time of application.
Borrowers
are also required to demonstrate at time of
application the ability to cover a closing cost
equal to at least 1.5% of the purchase price.
Maximum
purchase price can range from $125,000 to $250,000.
Your Mortgage Consultant will confirm the maximum
in your market area.
Maximum
GDSR ~ 32% (Principal + Interest + Property
Taxes + Heating Costs must not exceed 32% of
Gross Income).
Maximum
TDSR ~ 40% (Principal + Interest + Property
Taxes + Heating Costs + Monthly Obligations
including Credit Cards & Loans must not
exceed 40% of Gross Income).
Minimum
loan term for CMHC is 6 months with loan qualification
based on the current 5 year rate.
GENCOR
(GE Capital) currently has no minimum term requirement.
The
mortgage loan insurance premium is 3.75% of
the mortgage amount. (Premium can be added to
the mortgage or paid separately).
Credit
history must be in good standing.
|
"The
stress that I expected never materialized!
So many people have expressed how stressful it is
to purchase a home.
With you in my court, there were no sleepless night!
~ Anne S.
Can I use my RRSP's to help purchase
my home? TOP
How does the Home Buyers Plan (HBP) work?
Each purchaser may withdraw up to $20,000
from their RRSP to buy or build a qualifying
home. If you buy the qualifying home together
with your spouse or other individuals, each
of you can withdraw up to $20,000 to a combined
maximum of: $40,000. You must be a resident
of Canada; you may participate only once
in your lifetime and must be considered
a first time home buyer. You are considered
a first time home buyer if you haven't owned
a home at any time during a specified period.
Generally, a five year rule applies. The
funds must have been in the RRSP for at
least 90 days prior to withdrawal to be
eligible under the program. Nothing beats
the RRSP vehicle for 1st time buyer's. The
payback is over 15 years, with no interest
expense, plus you received a tax deduction
each year when making the original contributions.
A simple and tax effective way to get your
$40,000.00 down payment into the real estate
market. |
|
What
information is required to be Preapproved for a Mortgage? TOP
| If
you are applying for a preapproved mortgage, have
following information ready to give to your Mortgage
Intelligence Mortgage Consultant:
Have
your employer give you a letter on company letterhead
outlining your name, position, gross annual
income, and number of years employed with the
company.
If
you are self-employed, you will need three years
financial statements, and tax returns (together
with official assessment from Revenue Canada).
Social
Insurance Numbers.
At
least 3 years history of residences and employers.
Know
your banking information (i.e. institutions
name, address, type of accounts, account numbers)
Know
your assets and their value (i.e. cash
amounts, stocks, bonds, RRSPs, car).
Know
your liabilities (i.e. car loan, credit
card balances).
Also,
be sure and advise your Mortgage Intelligence
Mortgage Consultant about any past credit problems
you may have had.
Finally,
write down a list of questions you would like
to have answered.
|
Why
is verifying my Down Payment important? TOP
| If
there is 'one' thing that causes problems which
may delay the closing of your house it's verification
of the Down Payment. Here's why:
To
meet the Requirements of Canada Mortgage and
Housing Corporation, GENCOR (GE Capital) and
the Major Lending Institutions
On
or before the issuance of a lending commitment
you will be asked to provide "Confirmation of
Down Payment" from Non-borrowed funds in one
or more of the following forms.
Down
Payment from the Sale of an Existing Property
You will be required to provide a copy of
the unconditional "Purchase and Sale Agreement"
on your existing property. This needs to be
accompanied by a copy of the statement of "Mortgage
Balance" on any mortgages presently held against
the property. The difference between the sale
price and the mortgages owing will substantiate
the funds available for your down payment.
Down
Payment from a Gift All or part of the minimum
equity requirement may be provided by way of
a financial gift, as long as all of the following
conditions are met:
|
|
| (a) |
the
donor is an Immediate relative of the borrower; |
|
| (b) |
the
Approved Lender has verified that the money is
a genuine gift; and |
|
| (c) |
the
Approved Lender has verified that the funds
are in the borrower's possession prior to the
time of the application to CMHC or GENCOR for
mortgage loan insurance. |
|
| The
Approved Lender will verify the authenticity of
the gift by obtaining a written confirmation,
signed by the donor and the borrower, which
will include the following points: |
|
| (a) |
the
money is a genuine gift from the donor and does
not ever have to be repaid; |
|
| (b) |
no
part of the financial gift is being provided by
any third party having any interest (direct or
indirect in the sale of the subject property) |
|
| The
Approved Lender is not required to forward this
confirmation to CMHC, but is expected to retain
the Information in its paper or electronic loan
record.
Down
Payment from Your Own Resources You must
supply verification satisfactory to C.M.H.C.
or GENCOR and the lender of accumulated savings
from non-borrowed funds. This may be in the
form of a copy of your bank book confirming
a balance equivalent to your down payment including
the amount of deposit confirming the savings
of said amount for a period of not less than
3 months.
Should
a substantial deposit have been made recently,
the source of such funds, i.e. Bonds,
Stocks, G.I.C.'s or RRSP receipts will also
be required.
To
avoid any delay in funding your transaction
we suggest that you provide a form of the above
noted confirmation at least 14 days prior to
your closing date.
|
Is it true that I might Qualify for
Property Purchase Tax Exemption? TOP
The property purchase tax, (a tax of 1% of
the first $200,000 and 2% of the balance of the purchase
price) is waived if you are a first time buyer, Canadian
Citizen and the purchase price must not exceed $325,000.00
in the Greater Vancouver, Fraser Valley and Capital
Region Districts ($265.000.00 in Whistler and elsewhere).
A partial exemption is available for homes between
$325.000.00 and $350,000.00.
I
need a Mortgage Broker. Can you help? TOP
For
most people, a Mortgage Consultant acts like a
Mortgage Broker. Mortgage Consulting is the correct
title for what most people think of as a Mortgage Broker. |
What is the Purchase Plus Plan? TOP
| The
Purchase Plus Plan lets you add the cost of upgrades
to your mortgage before you move in! Eligible
upgrades include a new electrical service, a new
roof, central air, a new furnace, new siding,
eaves, soffits, facia, doors, windows, a new kitchen,
carpeting... or any other renovation that would
increase the value of the home.
The
way it works is like this... Let's assume that
you are a first time buyer and have 5% down
payment. Before the mortgage financing
is arranged, written quotes are obtained from
licensed contractors for the repairs
and or the improvements to be done to the home.
When the application for mortgage financing
is made, the request is made for 95% of the
purchase price PLUS 95% of the cost to complete
the improvements.
Note:
The lender will "hold-back" on closing
the "improvement" portion of the mortgage
until the work has been completed, normally
within 30 to 60 days of closing. Once the work
has been completed, the lender will advance
the balance of the funds and the contractor
can be paid. What does this mean? . . let me
give you an example. . .
|
| |
|
The
purchase price is: |
$150,000 X 95% = $142,500
|
|
| The
quote for the improvements is: |
$
11,000 X 95% = $ 10,450 |
|
| Total
Mortgage is: |
$161,000 X 95% = $152,950
|
| Therefore,
an application is made for a mortgage in the amount
of $152,950 which is 95% of the purchase price
plus 95% of the improvements.
On
closing this is what happens... The Mortgage
advanced to complete the purchase is $142,500
plus the original 5% from the purchasers down
payment ($7,500) sufficient funds to complete
the purchase of $150,000.
After
closing the contractor completes the improvements
(normally within 30 to 60 days after the closing)
the lender advances the hold-back of $10,450,
the purchaser pays the additional 5% of the
cost of the improvements ($550) and the $11,000
owed to the contractor can be paid as per the
original quote for the work.
And
you will get $11,000 of improvements done to
your home with a cash outlay of only $550 (the
balance was financed with your mortgage)!
|
What costs will I have to pay
on closing? TOP
| To
avoid any surprises on closing, a good rule of
thumb is to set aside an amount equal to 2-3%
of the purchase price to cover expenses like these: |
The Offer |
The Deposit: Part of your down payment,
a deposit is due upon acceptance of your offer. |
Prior to Closing |
Home Inspection: Prepared by a qualified
inspector to assess the property for defects and
poor maintenance. |
Appraisal: Prepared by an appraiser
chosen by the lender, by CMHC or GENCOR if the
mortgage is insured by either company. |
|
Closing Costs |
Legal Fee/Disbursements: Your lawyer
will quote his fee for closing the purchase and
mortgage(s) plus an approximation for his disbursements,
which includes registration fees, courier costs,
photocopies, etc. Ask for an estimate. |
Land Transfer Tax: See the chart enclosed
in this package to calculate the Land Transfer
Tax which is due on closing and reflected in the
"Statement of Adjustments" which your
lawyer prepares prior to closing day. |
|
Interest Adjustment: Monthly mortgage
payments are due on the first of the month. Unless
the closing date is the first of the month, you
must prepay the amount of the interest accruing
up to the 1st day of the following month, the
Interest Adjustment Date. |
|
CMHC or GE & PST: If your mortgage
is insured by CMHC or GENCOR the insurance premium
will usually be added to the mortgage so it is
not a cash requirement on closing. However, the
premium is subject to 8% PST, and the tax must
be paid on closing. |
|
Prepaid Expenses: If the Vendor has
prepaid any other expenses such as utilities,
water and sewage taxes, oil in tank or taxes,
he must be compensated. This will be reflected
in the Statement of Adjustments. |
|
Property Tax Hold-back: If the lender
is collecting and paying property taxes you may
be required to pay to the lender an amount to
ensure sufficient funds are available to pay the
next installment of property taxes when due. |
|
Other Fees: Occasionally, a lender
or the broker will charge a fee for providing
the mortgage. If so, these costs should be disclosed
to you at the time the Statement of Mortgage is
issued to you. |
|
